You must be registered and logged in to reply to posts or post new topics. Click on "How to Use This Forum" for simple instructions on how to get on board. NB: Please do not use your real name or email address as your screen name - if you do it will be changed to something less insecure.
COMMENT by Jimmy Thomson
It seems apartment developers are pulling out all the stops to sell their excess stock – especially as new units come on to the market in truckloads.
But potential buyers shouldn’t get over-excited by promises of stamp duty rebates, frequent flyer points and strata levy payments, all currently being offered in a bid to attract more buyers in a cooling market.
A record number of apartments are being delivered to the market at a time when tighter lending restrictions are taking their toll, says this report in the Domain section of the Sydney Morning Herald.
Incentives are being offered to get rid of stock, says Leigh Warner, national director and head of residential research at global property firm JLL, launching their latest quarterly Apartment Market Report.
Sydney’s unit sales fell more than 20 per cent last financial year, and the number of units being marketed over the three months to the end of September was also down more than 20 per cent on the previous quarter, the report shows.
Less demand, particularly from local and foreign investors, has seen many developers shift their focus towards attracting local owner-occupiers, the report released Thursday shows.
Some developers are still targeting investors by offering rental guarantees, stamp duty refunds and furniture packages.
But rather than rushing to snap up the enhanced deals, potential purchasers should be even more cautious than usual.
The “and there’s more” steak knives approach to selling apartments has a whiff of the pre-boom deals of about 10 years ago when apartment buyers were offered furniture packages, cash back and a guaranteed mortgage for the first year.
Their problems came a year later when they came to refinance their homes on a proper long-term mortgage and found that lenders immediately took the value of all those “gifts” off the sales price and revalued the properties at closer to what they were actually worth.
Some owners found they were in negative equity – they owed more that the property was worth – and were not only having to borrow at higher rates, but were struggling to even raise a deposit on the new loans.
That scenario is unlikely to occur in today’s post Royal Commission market, but even so, potential investors should be on high alert for dodgy deals.
Why would anyone be investing in a falling market anyway? Well, apartment prices are dropping less severely than house prices so if you were thinking of making a move to apartment living as a long-term prospect, now might be the time to do it.
Having said that, the JLL report expects apartment prices to bottom out in about a year.
However, there’s the prospect that if we do elect a Labor Federal government next year, and they do decide to wipe out negative gearing for new properties, but leave it for existing investments, you might want to have your ducks in a row before that happens.
Meanwhile, it has to be said that not all special offers are warning sign.
Mirvac – one of the more reputable developers – has been giving purchasers one million frequent flyer points when they bought off the plan and are currently offering a guaranteed first year rental, furnishing and window blinds package for buyers of completed apartments in The Finery complex in Alexandria.
That offer has the hallmarks of a company that’s trying to get some traction in a sliding market. And not all of the big names are getting into such proactive marketing.
Other reliable developers like Lend Lease emphasise community (although they may regret naming one of their new developments Gilead – the same name as the repressive regime in the Handmaid’s Tale TV series and novels).
Crown meanwhile – with its strong South-East Asian connections – are offering style as well as substance through their landmark developments such as The Waterfall and Infinity.
So, if you are determined to go against the flow and buy an apartment now, what should you be wary of?
Number one danger sign is the provenance of the developer. Even big, well-known companies have been known to register their developments under project-specific company names.
So, instead of FlatChat Global, builder of a million apartments around the world, you find that your developer is actually FlatChat Global of 666 JimmyT Boulevarde (the latter part of which just happens to be the address of the development).
Why would they do this? In simple terms, if the development all goes pear-shaped, the project specific developer can liquidate the company and walk off without paying their bills, probably collecting a generous tax break along the way, start up another renamed off-the-shelf company along the way and do it all again.
That’s not to say they will, but they can. And if they are already covering their backsides this way, do you really want to hand them your hard-earned?
The other danger sign is developers who have a string of failed companies behind them.
If you feel like doing some detective work, you can look for the list of the company’s directors on the ASIC website, and then search the directors’ names to see what they’ve been up to before.
Be aware, though, that reading these cases can be addictive – even if they have nothing to do with your search.
Finally, be very, very aware of dealing with developers that have no track record at all.
One of the classic cases that has kept the Flat Chat Forum enthralled for months, if not years, concerns a farmer who decided he wanted a flat with a view of the ocean – but completely ignored strata law and conventions when it came to running the apartment block he built underneath his penthouse.
The toxic combination of arrogance and ignorance was exacerbated by a strata manager who ran the initial AGM using the old, pre-2016 strata Act because “nobody told me it had been changed”.
So, yes there are bargains to be had out there, especially in new apartments – but be very, very careful about who you buy from.
Most Users Ever Online: 518
Currently Browsing this Page:
Billen Ben: 205
considerate band fair: 160
Guest Posters: 243
Moderators: Sir Humphrey, scotlandx, Lady Penelope, Stratabox.com.au, Jimmy-T, Liveby5